Free range claims eggs-aggerated

RL Adams Pty Ltd (the producers of Mountain Range Eggs) has been “fried” for making false and misleading “free range” claims in relation to its eggs and ordered to pay a pecuniary penalty of $250,000.

Between December 2013 and October 2014, RL Adams sold eggs labelled as “free range” to consumers across Australia. It did so by:

placing the words “free range” on its cartons together with images of mountain ranges; and

advertising on its website that its eggs are “produced by hens running freely on the farm during the day and housed at night to protect them from predators”, as well as making references to the hens being “free to roam” and “free to range”.

However, the hens were in fact housed in two barns that could only be opened with roller doors. The barns were also elevated above the outdoor range adjacent to them – but without any sort of ramp – with the effect that the hens were unable to leave the barns and access the outdoor range.

In December 2014, the ACCC commenced proceedings alleging that RL Adams had contravened sections 18, 29(1)(a) and 33 of the Australian Consumer Law, on the basis that the hens were farmed in conditions such that they could not freely roam on an open range on an ordinary day.

RL Adams subsequently admitted that the “free range” representations were false or misleading and that the representations were liable to mislead the public as to the nature and characteristics of its eggs.

When considering the appropriate penalty to be imposed for the contraventions, the Court determined that RL Adams’ conduct was to be treated as a single contravention. As a result, the maximum penalty that could have been imposed under the Australian Consumer Law was $1.1 million.

After having regard to “significant” mitigating factors (including RL Adams’ “near complete co-operation with the ACCC” and its admission of culpability), the Court determined that a pecuniary penalty of $250,000 was appropriate in the circumstances, together with declarations, publication orders and an order for a compliance program. Particular factors the Court noted in reaching this conclusion was the premium price RL Adams was charging as a result of labelling its eggs “free range” and the unquantifiable losses to other sellers of “free range” eggs, as well as its lack of a compliance program.

Although the pecuniary penalty imposed by the Court is not the largest to have been imposed in relation to “free range” claims – the largest being a joint penalty of $400,000 imposed on two companies in 2013 – it is part of a continued trend by the ACCC to investigate misleading “free range” claims. Many of these investigations have resulted in prosecutions where pecuniary penalties have been imposed by the Court, including in relation to “free range” eggs, ducks and chickens.

This continued trend was called out by the Court in RL Adams, with the Court listing a series of recent decisions and observing that although general deterrence is an important consideration in the imposition of pecuniary penalties, the pattern of recent cases relating to “free range” claims “illustrate that general deterrence is not having sufficient effect”.

It will be interesting to track whether any future proceedings against “free range” claims or similar representations result in further increased penalties, given the number of warnings now issued by the ACCC and the Court. At the very least, it appears that the ACCC’s investigations in this area will continue. ACCC Chairman Rod Sims has recently stated that the ACCC has actively focused on credence claims in primary industries, on the basis that:

The sunny side up is that this case represents a win for consumers who buy “free range” eggs and other “free range” products, with the ACCC scrambling to investigate potentially false or misleading claims in all areas of primary produce. Earlier this month, the ACCC announced it had completed an investigation in relation to “free range” claims in the pork industry, which resulted in the ACCC accepting court-enforceable undertakings from a number of producers.

However, it remains to be seen whether any legislation will be introduced across Australia to directly consider how “free range” products are labelled. Currently, only Queensland and the ACT have such legislation, although South Australia has announced the introduction of its own voluntary code. A bill introduced by the Greens into NSW Parliament in 2011 (“Truth in Labelling (Free-range Eggs) Bill”) failed to scramble the necessary votes.